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Maize prices surge, procurement for ethanol may be hit

Government's maize procurement for ethanol impacts prices, leading to concerns over reduced state procurement. Farmers may opt for private traders due to high prices. India promotes maize as a sugar alternative for ethanol production amid declining sugar production.

New Delhi: As the government gears up to procure maize for ethanol production, its prices have shot up in the main producing regions, leading to fears of reduced state procurement.

The increased prices can reduce the procurement by government agencies which have already made commitments to distilleries for ethanol production, said a senior government official, adding that the central agencies have already signed memorandum of understanding (MoUs) with over 40 distilleries that produce the clean fuel.

As market price stays elevated, farmers may prefer to sell to private traders over government channels which procures at a minimum support price (MSP) of ₹2,090 per quintal for kharif season (2023-24).

“We are registering farmers but will go strong with procurement when rabi maize starts arriving by end of April or beginning of May in Bihar as we expect prices to come down at that time,” the official added. The average price of maize in Bihar’s Gulabbagh crossed ₹2,400 per quintal in March end compared to ₹2,300 per quintal a month ago (February end), according to trade sources.

India is promoting the use of maize as an alternative to sugar to boost ethanol production and ensure sufficient supply of the sweetener in the market. In December, the government had directed sugar mills not to use cane juice to produce ethanol as the country’s sugar production is expected to decline in the 2023-24 marketing year that began in October.

The government estimates production of maize to drop to 32.4 mt from the previous year’s 38 mt according to the second advance estimates issued by the agriculture and farmers’ welfare ministry which traders said is insufficient to meet the demand once distilleries start producing ethanol with it.

The kharif harvest of 2023 was also lower than expected in certain parts of the country due to erratic and scanty rainfall during the season, leading to increased prices.

With the government planning to procure maize federally, farmers have planted more of it, moving away from other crops, taking the rabi (winter) sowing of the cereal to 20.51 lakh hectares till January 12, up by 4% against 19.71 lakh hectares during the corresponding period last year, according to government data, across major growing states – Karnataka, Madhya Pradesh, Bihar, Tamil Nadu, Telangana, Maharashtra and Andhra Pradesh.

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